Golden Eagle Retail Group exploits deep customer insight to drive growth with help from IBM and SAP

Published on 16-Jul-2013

"SAP and IBM Global Business Services has helped transform our business into a fast and flexible enterprise. By integrating and automating our business processes, we are well placed to increase sales from our existing VIP customer base and to expand into new regions – meeting our growth objective." - IT Director

Customer:
Golden Eagle Retail Group

Industry:
Retail

Deployment country:
China

Solution:
Enabling Business Flexibility, Enterprise Resource Planning, Information Management Foundation, Transforming Business, Virtualization, Virtualization - Server

IBM Business Partner:
SAP

Overview

Employing more than 5,600 people, Golden Eagle Retail Group Limited is one of the leading department stores in China. The group operates 27 stores across the country, and offers a wide range of products including clothing, jewelry and household appliances on a floor area totaling 798,000 square meters. Through its strong emphasis on customer service, the group has attracted over one million customers to its VIP loyalty program. Today, VIP customer purchases account for 58 percent of the group’s total gross sales.

Business need:
Golden Eagle Retail Group wanted to drive business growth by increasing sales from its VIP customer base, which contributes 58 percent of the group’s total sales. The Group first needed to gain a deeper understanding of VIP customer demand. This would enable it to rapidly identify popular product lines based on hard data rather than gut feeling, and adjust its supplier contracts to build up stock quickly.

Solution:
Golden Eagle Retail Group refreshed its business processes based on best practices for the retail industry and implemented SAP ERP applications to integrate sales, finance and supplier contract management processes. Next, the group deployed SAP NetWeaver Business Warehouse software. Using complete, up-to-date sales data generated by the SAP ERP applications, SAP NetWeaver Business Warehouse software enables accurate forecasting of VIP customer demand in real time. Golden Eagle Retail Group engaged IBM Global Business Services to advise on solution design, architecture and implementation.

Benefits:
Enables Golden Eagle Retail Group to rapidly identify the most popular products with VIP customers in each region using real-time customer demand forecasts, and adjust its supplier contracts to ensure that stock is rapidly available to meet demand. Predicted to help drive increased VIP customer sales and reduce the threat of losing sales to competitors. Facilitates future business expansion by automating 80 percent of the group’s financial processes.

Case Study

To read a Chinese version of this case study, please click here

Employing more than 5,600 people, Golden Eagle Retail Group Limited is one of the leading department stores in China. The group operates 27 stores across the country, and offers a wide range of products including clothing, jewelry and household appliances on a floor area totaling 798,000 square meters. Through its strong emphasis on customer service, the group has attracted over one million customers to its VIP loyalty program. Today, VIP customer purchases account for 58 percent of the group’s total gross sales.

Targeting opportunities for growth
As a well-established retailer in one of the world’s fastest-growing economies, Golden Eagle Retail Group wanted to use the advantage of a strong market position to drive business growth. To achieve this objective, the group wanted to maximize sales opportunities from its existing VIP customer base, and to expand into other areas of China to win new VIP customers.

To increase sales from its existing VIP customers, the group first had to understand fast-changing demand for each of the product lines that it stocked. This was a complex task, as demand for individual product lines varied greatly between department stores located in different regions of the country. In addition, the product lines came from many different suppliers, which required the group to manage a large number of contracts to keep products in stock.

As the IT Director at Golden Eagle Retail Group Limited explains: “Retail trends in China vary greatly from region to region – which means a one-size-fits-all approach to stocking our stores is ineffective. For example, the fact that a certain product is popular in our core market of Jiangsu Province is no indication that it will be as popular elsewhere. If we do not adjust our supplier contracts to stock popular products where they are in demand, we can be certain that one of our competitors will.”

Need to predict VIP customer demand
In order to maximize sales from its existing VIP customers, and to reduce the threat from competitors, Golden Eagle Retail Group wanted the ability to identify the most popular product lines in each region, and then adjust its supplier contracts to meet demand. Using the group’s legacy business process and reporting tools, this proved a challenging task.

“In the past, each department store negotiated with all of its suppliers individually,” says the IT Director.

“These contract negotiations were based on static sales reports generated using a very limited amount of data. Because there was no way to perform accurate demand forecasting using these sales reports, the stores’ decisions on which product lines to stock were often based on gut feeling rather than hard data. This meant that we were frequently too late to identify emerging trends in customer demand and adjust our supplier contracts to get the most popular product lines on our shelves.”

Reducing the business risk of expansion
Golden Eagle Retail Group realized that attempting to open new department stores without a strong understanding of customer demand posed a business risk. If the group could not be confident in its ability to attract a large VIP customer base in other regions of China, then total profits would suffer.

The challenge of understanding regional fluctuations in customer demand was not the only obstacle to growth. The group’s paper-based financial processes, which had been sufficient for a smaller number of stores, would not scale economically to meet the additional workload requirements of expansion.

The IT Director comments: “Our financial processes used to be completely disconnected from business activities on the store floor. At the end of every month, our department stores would submit paper-based sales reports to the finance department, who would manually process the data for the purposes of shareholder reporting and paying our suppliers. As a listed company, completing these processes in a timely manner is critical to the business. To enable expansion, we realized that we needed to increase the efficiency of our financial processes significantly.”

Choosing SAP® ERP solutions
A critical component of Golden Eagle Retail Group’s growth strategy is new store openings. The group determined that consolidating its disconnected business processes in a single, integrated solution would offer the real-time sales insights, advanced customer demand forecasting and automated financial reporting that the group needed to go ahead with its aggressive growth plans.

“We selected SAP ERP solutions because we were impressed by their strong reputation in the retail industry,” says the IT Director. “SAP ERP applications offered us a comprehensive set of functionalities that were perfectly aligned with our business requirements.”

After making the decision to implement the SAP ERP applications, Golden Eagle Retail Group required a secure, scalable and high-performance IT platform to ensure that they could meet the needs of a total of 400 active business users.

Working together with IBM® Global Technology Services® – Business Solution Design, Architecture, Project Implementation, Maintenance and Technical Support Services, the group selected an IBM Power® 770 server running IBM AIX® version 6.1 on IBM PowerVM®.

Today, the group uses 20 IBM POWER7® processors divided into three logical partitions (LPARs) to host the SAP ERP central instance and databases, SAP NetWeaver® Business Warehouse application, and SAP NetWeaver Process Integration technology. For its SAP BusinessObjects™ solutions, Golden Eagle Retail Group chose a 32-core IBM BladeCenter® solution populated with HS22 and HX5 blades running Microsoft Windows Server 2008 Enterprise Edition.

To enable rapid recovery in the event of a disaster scenario, Golden Eagle Retail Group uses IBM Tivoli® Storage Manager software to complete regular backups of data stored on its IBM System Storage® DS8000. Tivoli Storage Manager automates data backup and restore functions and centralizes storage management operations. The single administrator interface allows configuration, monitoring, reporting and backup/recovery execution across the group’s entire IT environment, for both the POWER® and Intel processor-based systems.

Expert consulting from IBM Global Business Services®
To deploy its SAP ERP applications quickly and effectively, Golden Eagle Retail Group engaged expert consultants from IBM Global Business Services. “Because of the strategic partnership between IBM and SAP, we knew that the IBM Global Business Services team had the knowledge and expertise to help us to realize the business objectives of our SAP ERP software implementation project,” says the IT Director.

“Furthermore, the IBM team’s retail-sector experience perfectly complemented our team’s own first-hand experience of the industry.”

Working together with all parts of the group’s business – from the shop floor to the finance department – the IBM team performed an in-depth analysis of Golden Eagle Retail Group’s legacy processes. After determining the group’s business requirements, the IBM team helped the group to refresh its processes based on best-practice approaches for the retail industry, and then deploy the SAP ERP solutions to support the new way of working.

The IT Director comments: “The IBM team worked with more than 100 of our personnel across eight provinces to understand our business requirements. Using these insights, the IBM team helped us to build the business solution to optimize our operations, and to train our people to use the applications effectively. IBM Global Business Services created a solution that was based around best practices and individual to our needs, with integrated, optimized operations.”

In close collaboration with Golden Eagle Retail Group, the IBM team implemented SAP ERP applications for Controlling, Customer Relationship Management (CRM), Financials, Supplier Relationship Management (SRM), and Sales and Distribution, and the SAP NetWeaver Mobile component – integrating the company’s previously disconnected business processes.

To provide business analytics and forecasting capabilities, the team installed SAP BusinessObjects business intelligence solutions with the SAP NetWeaver Business Warehouse application.

Delivering accurate sales insights
By integrating its business operations using SAP ERP software, Golden Eagle Retail Group has gained a single, definitive and easily-accessible source of sales data, and is able to generate accurate, timely insights into VIP customer demand.

“In the past, it was extremely difficult to understand exactly what our VIP customers wanted – today, that’s all changed,” says the IT Director. “If our legacy solution were like an X-ray machine, then the SAP solution is like a CT scanner. We can now drill down through our sales data to see how many of each type of product we are selling – for example, how many suits, ties and socks were sold at each store daily, as well as how many of each color or design.”

The IT Director adds: “Previously, our department stores had to perform contract negotiations based on static reports created using a limited amount of sales data. Using SAP NetWeaver Business Warehouse software, we can empower our personnel with the ability to create reports and forecasts in real time using complete, up-to-the minute sales data.

“These tools help managers to rapidly identify trends in VIP customer demand, and quickly update our supplier contracts to get the most popular products on our shelves. There are strong differences in VIP customer tastes across the regions we operate in. Understanding these differences with analytics solutions from IBM helps us to ensure that the product ranges we stock at each store reflect these tastes – reducing the risk of losing VIP customer sales to our competitors.”

Opening the way to new markets
In addition to helping the company to increase sales to its existing VIP customers, the SAP and IBM solutions enable the company to reduce the business risk of expanding into new regions of China to win new VIP customers.

The IT Director says: “Because our legacy financial process were paper based, it would have been impossible to increase the department’s workload without introducing the business risk of delays in supplier payments or financial reporting for our shareholders.

“Today, our financial processes are fully integrated with the rest of the business using the SAP ERP solutions – meaning that sales reports no longer need to be mailed to the department and processed manually. In fact, using SAP ERP applications we have now automated 80 percent of our financial management processes – offering the headroom we need to expand the business.”

Looking to the future
Following the successful implementation of the SAP ERP solutions, Golden Eagle Retail Group has plans to drive even greater value for the business. “Our SAP ERP and SAP NetWeaver Business Warehouse solutions provide optimized operations and profitable customer insight, and IBM Global Business Services is helping us to create and capture business value in new ways,” says the IT director.

He concludes: “SAP and IBM Global Business Services has helped transform our business into a fast and flexible enterprise. By integrating and automating our business processes, we are well placed to increase sales from our existing VIP customer base and to expand into new regions – meeting our growth objective.”

Products and services used

IBM products and services that were used in this case study.

Hardware:
BladeCenter, BladeCenter HS22, BladeCenter HX5, BladeCenter running OS - Windows, Storage, Storage: DS8000

Software:
AIX, Tivoli Storage Manager, PowerVM

Service:
GBS ISV Community: SAP, GTS ITS IT Strategy & Design: IT Transform Strategy & Design, GTS Technical Support Services: Hardware Maintenance, GTS Technical Support Services: Solution Support, IBM-SAP Alliance

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